Car financing basics. How much money to put down?

[Anonymous]

I don't know anything about cars or finance. Please be nice. How much money do they expect people to put down and if I have a choice how much should I put down?

[Anonymous]

In general, you shouldn't be financing unless you get REALLY advantageous terms in addition to a well-negotiated purchase price. Don't fall for 0% financing while overpaying for the vehicle. If you DO get a great price AND great financing terms, then you want your down payment to be as close to zero as possible. That is, you are financing because you have a better place to put the money, so finance as much as you can.

If you MUST finance the car in order to complete the purchase, then put down as much as you can. Borrowing costs money, so borrow as little as you can.

[Anonymous]

As long as borrowing costs are below inflation there is absolutely no reason not to finance the full price of the car.

[Anonymous]

I’d go for 20% as a goal or whatever makes sense for your overall budget and how badly you need a car. not sure banks really care. Be aware new vs used car financing. Usually there are fees if you pay off new car early but not the case with used car.

[Anonymous]

Anonymous wrote:As long as borrowing costs are below inflation there is absolutely no reason not to finance the full price of the car.

Assuming your wages go up

[Anonymous]

Financing or not is unimportant. You can always pay it off right away (if you have the money)

[Anonymous]

Anonymous wrote:Usually there are fees if you pay off new car early but not the case with used car.

Rarely if ever anymore.

[Anonymous]

Anonymous wrote:

Anonymous wrote:As long as borrowing costs are below inflation there is absolutely no reason not to finance the full price of the car.

Assuming your wages go up

No true. Your wages don't need to go up for the previous statement to be correct. Even if your wages are fixed, you are paying the loan in dollars that are worth less in the future and are able to use today's dollars to buy other things. Of course, you could also invest the money in something safe like US t-bils and still earn more than the interest rate on most car loans. Basically there is no argument against financing unless all you understand about finance is what Dave Ramsay told you

[Anonymous]

Try to finance for 48 months or less. Avoid terms like 72 months (6 years) even if they advertise a lower monthly payment.

Negotiate the price of the car, not the monthly payment. Don't fall for the dealer trick of trying to tell you what the car will cost per month. Get the out-the-door-price and do the math yourself on a 36- or 48-month loan. 24 if you can swing it.

Ideally get your loan approved by a credit union or your bank before you go car shopping. Dealer financing can compete.

You will probably need to buy gap insurance, which covers you between the value of the car and what remains on your note in the event of a crash.

[Anonymous]

About 20%, less if you have a trade.

Get the best loan that suits your budget.

[Anonymous]

Anonymous wrote:Financing or not is unimportant. You can always pay it off right away (if you have the money)

This.